Aruba Limbo Has Some Goliath Bondholders Abandoning Ship

As the 591-foot-long OSA Goliath idles off the Aruban coast for a seventh month, prices for bonds backed by the oil-services vessel signal that some investors are starting to jump ship.

The $160 million in secured notes due in 2018 have fallen 10 cents on the dollar since early August to 105 cents, according to prices from Pareto Securities and Bloomberg, while emerging-market corporate bonds on average were little changed.

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The ship is waiting to be sold after bondholders seized Goliath as collateral from Oceanografia SA, the oil-services company that was accused of fraud in February by Citigroup Inc. and taken over by Mexico’s government. The bonds surged as much as 26 cents after the takeover to 115 cents in July on speculation a quick sale of the ship, which has an estimated value of $245 million, would be enough to compensate investors.

“Perhaps people close to the matter are starting to see it’s going to take longer than expected to realize capital value,” Michael Roche, an emerging-market bond strategist at Seaport Global Holdings LLC in New York, said by telephone.

Although Petroleos Mexicanos, the state-owned oil company, was Oceanografia’s biggest customer, there could be potential challenges to using the ship in Mexican waters that may deter would-be buyers, according to a July 11 letter from Oslo-based Nordic Trustee.

Viable Alternatives

Marcia Fuentes, executive director for business administration and bankruptcies at the agency running Oceanografia, said in a Sept. 5 interview that the government is examining legal options for asserting a claim on the Goliath.

The agency is in talks with the trustee “to determine the most viable alternative,” she said.

Fredrik Lundberg, the head of corporate bonds for Nordic Trustee, declined to comment on the Goliath’s sale process or the bond’s performance.

Felipe V. Consuelo Soto, the civil court judge presiding over the Oceanografia bankruptcy, said he’s received no notification of any claims related to the Goliath from the government or the bond trustee.

Mexico’s peso fell 0.4 percent to 13.2677 per dollar at 1:31 p.m. in New York.

With unpaid interest accumulating, the bonds as of July were worth at least 142 cents on the dollar if paid in full, according to Jim Harper, head of research at BCP Securities LLC.

The lack of news since Nordic Trustee’s letter in July may now be fueling concern among some investors that the sale won’t go through, he said.